Lopez Sugar Corporation vs. Federation of Free Workers

SUPREME COURT REPORTS ANNOTATED VOLUME 189 16/11/2020, 5)22 PM
VOL. 189,AUGUST 30, 1990 179

Lopez Sugar Corporation vs. Federation of Free Workers
*
G.R. Nos. 75700-01. August 30, 1990.
LOPEZ SUGAR CORPORATION, petitioner, vs.

FEDERATION OF FREE WORKERS, PHILIPPINE
LABOR UNION ASSOCIATION (PLUA-NACUSIP) and
NATIONAL LABOR RELATIONS COMMISSION,
respondents.
Labor Law; Circumstances under which the employer may

retrench or reduce the number of his employees.·We consider it may
be useful to sketch the general standards in terms of which the acts
of petitioner employer must be appraised. Firstly, the losses
expected should be substantial and not merely deminimis in extent.
If the loss purportedly sought to be forestalled by retrenchment is
clearly shown to be insubstantial and inconsequential in character,
the bona fide nature of the retrenchment would appear to be
seriously in question. Secondly, the substantial loss apprehended
must be reasonably imminent, as such imminence can be perceived
objectively and in good faith by the employer. There should, in other
words, be a certain degree of urgency for the retrenchment, which is
after all a drastic recourse with serious consequences for the
livelihood of the employees retired or otherwise laid-off. Because of
the consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the expected
losses. The employer should have taken other measures prior or
parallel to retrenchment to forestall losses, i.e., cut other costs than
labor costs. An employer who, for instance,
_______________
* THIRD DIVISION.
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180 SUPREME COURT REPORTS ANNOTATED
lays off substantial numbers of workers while continuing to

dispense fat executive bonuses and perquisites or so-called „golden
parachutes‰, can scarcely claim to be retrenching in good faith to
avoid losses. To impart operational meaning to the constitutional
policy of providing „full protection‰ to labor, the employerÊs
prerogative to bring down labor costs by retrenching must be
exercised essentially as a measure of last resort, after less drastic
means·e.g., reduction of both management and rank-and-file
bonuses and salaries, going on reduced time, improving
manufacturing efficiencies, trimming of marketing and advertising
costs, etc.·have been tried and found wanting.
Same; Alleged losses must be proved by sufficient evidence.
·Lastly, but certainly not the least important, alleged losses if
already realized, and the expected imminent losses sought to be
forestalled, must be proved by sufficient and convincing evidence.
The reason for requiring this quantum of proof is readily apparent:
any less exacting standard of proof would render too easy the abuse
of this ground for termination of services of employees.
Same;Same;Jurisprudence that factual findings of labor arbiter
are entitled to great respect and finality.·We are in principle bound
by such findings in accordance with well-established jurisprudence
that the factual findings of labor administrative officials, if
supported by substantial evidence, are entitled not only to great
respect but even to finality, unless, indeed, petitioner is able to
show that the Labor Arbiter and the NLRC simply and arbitrarily
disregarded evidence before them or had misapprehended evidence
of such a nature as to compel a contrary conclusion if properly
appreciated.
Same; Same; Same; CBA continued to have legal effects until a
new CBA is negotiated and entered into.·On this point, we must
find for petitioner. Although the CBA expired on 31 December 1977,
it continued to have legal effects as between the parties until a new
CBA had been negotiated and entered into. This proposition finds
legal support in Article 253 of the Labor Code, which provides:
„Article 253·Duty to bargain collectively when there exists a
collective bargainingagreement.·When there is a collective
bargaining agreement, the duty to bargain collectively shall also
mean that neither party shall terminate nor modify such agreement
during its lifetime. However, either party can serve a written notice
to terminate or modify the agreement at least sixty (60) days prior
to its expiration date. It shall be the duty of both parties to keep the
status quo and to continue in full force and effect the terms and
conditions of the existing agreement during the 60-day period
and/or until a new agreement is reached by
181
VOL. 189, AUGUST 30, 1990 181
theparties.‰ (Italics supplied) Accordingly, in the instant case,

despite the lapse of the formal effectivity of the CBA by virtue of its
own provisions, the law considered the same as continuing in force
and effect until a new CBA shall have been validly executed. Hence,
petitioner acted within legal bounds when it decided to retire
several employees in accordance with the CBA. That the employees
themselves similarly acted in accordance with the CBA is plain
from the record. Even after the expiration of the CBA, petitionerÊs
employees continued to receive the benefits and enjoy the privileges
granted therein. They continued to avail of vacation and sick leaves
as computed in accordance with Articles VII and VIII of the CBA.
They also continued to avail of medical and dental aid under Article
IX, death aid and bereavement leave under Articles X and XIV,
insurance coverage under Article XVI and housing allowance under
Article XVIII. Seventeen (17) employees even availed of Section XI
(dealing with retirement) when they voluntarily retired between 1
January 1978 and 31 December 1980 and received retirement pay
computed on the basis of Section 3 of the same article. If the
workers chose to avail of the CBA despite its expiration, equity·if
not the lawdictates that the employer should likewise be able to
invoke the CBA.
Same; Same; Same; Same; Quitclaims executed by laborers,

contrary to public policy and ineffective to bar claims of the workers
·The fact that several workers signed quitclaims will not by itself
bar them from joining in the complaint. Quitclaims executed by
laborers are commonly frowned upon as contrary to public policy
and ineffective to bar claims for the full measure of the workersÊ
legal rights. In AFP Mutual Benefit Association, Inc.v.AFP-MBAI-
EU, the Court held: „In labor jurisprudence, it is well established
that quitclaims and/or complete releases executed by the employees
do not estop them from pursuing their claims arising from the
unfair labor practice of the employer.The basic reason for this is that
such quitclaims and/or complete releases are against public policy
and, therefore, null and void. The acceptance of termination pay
does not divest a laborer of the right to prosecute his employer for
unfair labor practice acts.
PETITION for certiorari to review the decision of the

National Labor Relations Commission.
The facts are stated in the opinion of the Court.

Sicangco, Diaz, Ortiz and Lapak for petitioner.
Reynaldo J. Gulmatico for private respondents.
182

FELICIANO, J.:
In this Petition, petitioner Lopez Sugar Corporation seeks

reversal of the Decision dated 2 July 1986 of public
respondent National Labor Relations Commission
(„NLRC‰) which affirmed the decision of the Labor Arbiter
dated 30 September 1983. The Labor Arbiter (a) had denied
petitionerÊs application to retrench some of its employees
and (b) had ordered the reinstatement of twenty-seven (27)
employees and to pay them full backwages from the time of
termination until actual reinstatement.
Petitioner, allegedly to prevent losses due to major
economic problems, and exercising its privilege under
Article XI, Section 2 of its 1975-1977 Collective Bargaining
Agreement („CBA‰) entered into between petitioner and

private respondent Philippine Labor Union Association
(„PLUA-NACUSIP‰), caused the retrenchment and
retirement of a number of its employees.
Thus, on 3 January 1980, petitioner filed with the
Bacolod District Office of the then Ministry of Labor and
Employment („MOLE‰) a combined report on retirement
and application1 for clearance to retrench, dated 28
December 1979, affecting eighty-six (86) of its employees.
This was docketed as NLRC Case No. A-217-80. Of these
eighty-six (86) employees, fifty-nine (59) were retired
effective 1 January 1980 and twenty-seven (27) were to be
retrenched effective 16 January 1980 „in order to prevent
losses.‰
Also, on 3 January 1980, private respondent Federation
of Free Workers („FFW‰), as the certified bargaining agent
of the rank-and-file employees of petitioner, filed with the
Bacolod District Office of the MOLE a complaint dated 27
December 1979 for unfair labor practices and recovery of
union dues, docketed as NLRC Case No. A-198-80. In said
complaint, FFW claimed that the terminations undertaken
by petitioner were violative of the security of tenure of its
members and were intended to „bust‰ the union and hence
constituted an unfair labor practice. FFW claimed that
after the termination of the services of its members,
petitioner advised 110 casuals to report
_______________
1 Rollo, pp. 38-39; Annexes „A‰ and „A-1‰ of Petition.
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VOL. 189,AUGUST 30, 1990 183

to its personnel office. FFW further argued that to justify

retrenchment, serious business reverses must be „actual,
real and amply supported by sufficient and convincing
evidence.‰ FFW prayed for reinstatement of its members
who had been retired or retrenched.
Petitioner denied having hired casuals to replace those
it had retired or retrenched. It explained that the

announcement calling for 110 workers to report to its
personnel office was only for the purpose of organizing a
pool of extra workers which could be tapped whenever
there were temporary vacancies by reason of leaves of
absence of regular workers.
On 22 January 1980, another report on retirement
affecting an additional twenty-five (25) 2employees effective
1 February 1980 was filed by petitioner.
On 3 March 1980, petitioner filed its Position Paper in
NLRC Case No. A-217-80 contending that certain economic
factors jeopardizing its very existence rendered the
dismissals necessary. Petitioner explained:
„As a business firm, the Applicant must earn [a] fair return of (sic)
its investment. Its income is generated from the sales of the
CentralÊs shares of sugar and molasses production. It has however
no control of the selling price of both products. It is of common
knowledge that for the past years the price of sugar has been very
low. In order to survive, the Applicant has effected several forms of
cost reduction. Now that there is hope in the price of sugar the
applicant is again faced with two major economic problems, i.e., the
stoppage of its railway operation and the spiralling cost of
production.
The Applicant was forced to stop its railway operation because
the owners of the land upon which the ApplicantÊs railway lines
traverse are no longer willing to allow the Applicant to make
further use of portions of their lands. x x x
The other economic problem that confronted the Applicant is the
rising cost of labor, materials, supplies, equipment, etc. These two
major economic problems the rising cost of production and the
stoppage of its railway facilities, put together pose a very serious
threat against the economic survival of the Applicant. In view of
this, the Applicant was constrained to touch on the last phase of its
cost reduction program which is the reduction of its workforce.
_______________
2 Id., pp. 40-41; Annexes „B‰ and „B-1‰ of the Petition.
184
xxx xxx xxx

The Applicant as a business proposition must be allowed to earn
income in order to survive. This is the essence of private enterprise.
Being plagued with two major economic problems, the applicant is
not expected to remain immobile. It has to react accordingly. As
many other business firms have resorted to reduction of force in
view of the present economic crisis obtaining here and abroad, the
applicant was likewise compelled to do the same as a last
3
alternative remedy for survival.‰
4
In a decision dated 30 September 1983, the Labor Arbiter
denied petitionerÊs application for clearance to retrench its
employees on the ground that for retrenchment to be valid,
the employerÊs losses must be serious, actual and real and
must be amply supported by sufficient and convincing
evidence. The application to retire was also denied on the
ground that petitionerÊs prerogative to so retire its
employees was granted by the 1975-77 collective
bargaining agreement which agreement had long ago
expired. Petitioner was, therefore, ordered to reinstate
twenty-seven retired or retrenched employees represented
by private respondent Philippine Labor Union Association
(„PLUA‰) and FFW and to pay them full backwages from
the time of termination until actual reinstatement.
Both dissatisfied with the Labor ArbiterÊs decision,
petitioner and respondent FFW appealed the case to public
respondent NLRC. On appeal, the NLRC, finding no
justifiable reason for disturbing the decision 5 of the Labor
Arbiter, affirmed that decision on 2 July 1986.
Hence, this Petition for Certiorari making the following
arguments:
1. That portions of the decision of public respondent

NLRC dated July 2, 1986 affirming the decision of
Labor Arbiter Ethelwoldo Ovejera dated September
30, 1983 are contrary to law and jurisprudence;
2. That said decision subject of this petition are in
some respects not supported by evidence and self-
contradictory;
_______________
3 Id., pp. 46-48; Annex „E‰ of Petition.

4 Id., pp. 86-100; Annex „J‰ of Petition.
5 Id., pp. 114-119; Annex „L‰ of Petition.
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VOL. 189, AUGUST 30, 1990 185

3. That said decision subject of this petition were

rendered with grave abuse of discretion and in
excess of jurisdiction;
4. That the dismissals6 at bar are valid and based on
justifiable grounds.
Petitioner contends that the NLRC acted with grave abuse

of discretion in denying its combined report on retirement
and application for clearance to retrench. Petitioner argues
that under the law, it has the right to reduce its workforce
if made necessary by economic factors which would
endanger its existence, and that for retrenchment to be
valid, it is not necessary that losses be actually sustained.
The existence of valid grounds to anticipate or expect losses
would be sufficient justification to enable the employer to
take the necessary actions to prevent any threat to its
survival.
Upon the other hand, the Solicitor General argued that
the Decision rendered by the Labor Arbiter and affirmed by
the NLRC is supported by substantial evidence on record;
that, therefore, no grave abuse of discretion was committed
by public respondent NLRC when it rendered that
Decision.
Article 283 of the Labor Code provides:
„Article283. Closure of establishment and reduction of personnel.·

The employer may also terminate the employment of any employee
due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Ministry of Labor

and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses,
the separation pay shall be equivalent to one (1) month pay or at
least one half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6)
_______________
6 Id., p. 20.
186

months shall be considered one (1) whole year.‰ (Italics supplied)
In its ordinary connotation, the phrase „to prevent losses‰

means that retrenchment or termination of the services of
some employees is authorized to be undertaken by the
employer sometime before the losses anticipated are
actually sustained or realized. It is not, in other words, the
intention of the lawmaker to compel the employer to stay
his hand and keep all his employees until 7
sometime after
losses shall have in fact materialized; if such an intent
were expressly written into the law, that law may well be
vulnerable to constitutional attack as taking property from
one man to give to another. This is simple enough.
At the other end of the spectrum, it seems equally clear
that not every asserted possibility of loss is sufficient legal
warrant for reduction of personnel. In the nature of things,
the possibility of incurring losses is constantly present, in
greater or lesser degree, in the carrying on of business
operations, since some, indeed many, of the factors which
impact upon the profitability or viability of such operations
may be substantially outside the control of the employer.

Thus, the difficult question is determination of when, or
under what circumstances, the employer becomes legally
privileged to retrench and reduce the number of his
employees.
We consider it may be useful to sketch the general
standards in terms of which the acts of petitioner employer
must be appraised. Firstly, the losses expected should be
substantial and not merely deminimis in extent. If the loss
purportedly sought to be forestalled by retrenchment is
clearly shown to be insubstantial and inconsequential in
character, the bonafide nature of the retrenchment would
appear to be seriously in question. Secondly, the
substantial loss apprehended must be reasonably
imminent, as such imminence can be perceived objectively
and in good faith by the employer. There should, in other
words, be a certain degree of urgency for the retrenchment,
which is after all a drastic recourse with serious
consequences for the liveli-
_______________
7 Indino v. National Labor Relations Commission, et al., G.R. No.

80352, September 29, 1989.
187
VOL. 189,AUGUST 30, 1990 187

hood of the employees retired or otherwise laid-off. Because

of the consequential nature of retrenchment, it must,
thirdly, be reasonably necessary and likely to effectively
prevent the expected losses. The employer should have
taken other measures prior or parallel to retrenchment to
forestall losses, i.e., cut other costs than labor costs. An
employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses
and perquisites or so-called „golden parachutes‰, can
scarcely claim to be retrenching in good faith to avoid
losses. To impart operational meaning to the constitutional
policy of providing „full protection‰ to labor, the employerÊs
prerogative to bring down labor costs by retrenching must

be exercised essentially as a measure of last resort, after
less drastic means·e.g., reduction of both management
and rank-and-file bonuses and salaries, going on reduced
time, improving manufacturing efficiencies, trimming of
marketing and advertising costs, etc.·have been tried and
found wanting.
Lastly, but certainly not the least important, alleged
losses if already realized, and the expected imminent losses
sought to be forestalled, must be proved by sufficient and
convincing evidence. The reason for requiring this quantum
of proof is readily apparent: any less exacting standard of
proof would render too easy the abuse of this ground for
termination of services of employees.
8
In Garcia v.National
Labor Relations Commission, the Court said:
„x x x But it is essentially required that the alleged losses in

business operations must be prove[n]. (National Federation of Labor
Unions [NAFLU] vs. Ople, 143 SCRA 124 [1986]). Otherwise, said
ground for termination would be susceptible to abuse by scheming
employerswhomightbemerelyfeigningbusinesslossesorreversesin their
9
business ventures in order to ease out employees.‰ (Italics supplied)
Whether or not an employer would imminently suffer

serious
_______________
8 153 SCRA 639 (1987); See also Camara Shoes v. Kapisanan ng

Manggagawa sa Camara Shoes, 173 SCRA 127 (1989); and Indino v.
National Labor Relations Commission, supra.
9 153 SCRA at 651.
188

or substantial losses for economic reasons is essentially a

question of fact for the Labor Arbiter and the NLRC to
determine. In the instant case, the Labor Arbiter found no
sufficient and convincing evidence to sustain petitionerÊs
essential contention that it was acting in order to prevent

substantial and serious losses. The Labor Arbiter said:
„There is no question that an employer may reduce its work force to

prevent losses, however, these losses must be serious, actual and
real. In the instant case, even assuming arguendo that applicant
company was, in fact, surrounded by the major economic problems
stated earlier, the question may be asked·will it suffer serious
losses as a result of the said economic problems? We find the answer
to be negative. We have scanned the records but failed to find
evidence submitted to show that applicant company would suffer
serious business losses or reverses as a consequence of the alleged
major economic problems. In fact, applicant company asseverated
that these problems only threatens its survival, hence, it had to
reduce its work force. Another thing, while applicant company was
retrenching its regular employees,it also hired the services of
casuals. This militated its claim to reduce its work force to set up
cost reduction. It must be stated that settled is the rule that serious
business losses or reverses must be actual, real and amply
10
supported by sufficient and convincing evidence.‰ (Italics supplied)
We are in principle bound by such findings in accordance

with well-established jurisprudence that the factual
findings of labor administrative officials, if supported by
substantial evidence,11 are entitled not only to great respect
but even to finality, unless, indeed, petitioner is able to
show that the Labor Arbiter and the NLRC simply and
arbitrarily disregarded evidence before them or had
misapprehended evidence of such a nature as to compel a
contrary conclusion if properly appreciated.
_______________
10 Rollo, p. 98.
11 Mamerto v. Inciong, 118 SCRA 265 (1982); Atlas Consolidated
Mining and Development Corp. v. National Labor Relations Commission,
167 SCRA 758 (1988); Reyes v. Minister of Labor, 170 SCRA 134 (1989);
Bristol Laboratories Employees Association-DFA, et al. v. National Labor
Relations Commission, et al., G.R. No. 87974, 2 July 1990.
189
VOL. 189, AUGUST 30, 1990 189
The submissions made by petitioner in this respect are

basically that from the crop year 1975-1976 to the crop year
1980-1981, the amount of cane deliveries made to
petitioner Central was declining and that the degree of
utilization of the millÊs capacity and the sugar recovery
from the12 cane actually processed, were similarly
declining. Petitioner also argued that the competition
among the existing sugar mills for the limited supply of
sugar cane was lively and that such competition resulted in
petitioner having to close approximately13thirty-eight (38) of
its railroad lines by the end of 1979. According to the
petitioner, the cost of producing one (1) picul of sugar
during the same period (i.e., from crop year 1976-1977 to
crop year 1979-1980) increased from P69.97 to P93.11.
The principal difficulty with petitionerÊs case as above
pre-
_______________
12 In its Petition, petitioner alleged that:
„1. Based on its sugar millsÊ rated capacity of 7,500 to 8,000 tons of
cane per day, petitionerÊs production figures were as follows:
Crop Cane Rate of Degree Sugar Rate

Year Deliveries in Increase Mill Recoveries Increase(Decrease)
(CY) Tons (Decrease) Utilization in Piculs
________ _____________ __________ ________ __________ ________
1975-76 1,307,121.901 71.96% 2,047,291
1976-77 1,282,189.530 (1%) 70.80% 1,934,830 (5%)
1977-78 1,004,490.358 (21%) 55.56% 1,709,504 (11%)
1978-79 1,161,604.791 15% 64.25% 1,884,611 10%
1979-80 1,163,662.687 .0177% 64.26% 1,854,115 (1%)
1980-81 1,008,643.990 (13%) 55.64% 1,594,310 (14%)
These figures show that there was a continued decrease in production,

both in cane deliveries and in sugar recoveries from CY 1975-76 to CY
1977-78. While there were increases in cane deliveries in CY 1978-79 and
CY 1979-80, this was more because of PetitionerÊs increased trucking
allowance which proved to be too expensive. But petitionerÊs studies
projected that such increase were temporary and would not hold, as
tonnage of deliveries did fall in CY 1980-81 to a level only slightly higher

than those in CY 1977-78.‰ (Rollo, p. 32)
13 Rollo, p. 33.
190

sented was that no proof of actual declining gross and net

revenues was submitted. No audited financial statements
showing the financial condition of petitioner corporation
during the above mentioned crop years were submitted.
Since financial statements audited by independent external
auditors constitute the normal method of proof of the profit
and loss performance of a company, it is not easy to
understand why petitioner should have failed to submit
such financial statements.
Moreover, while petitioner made passing reference to
cost reduction measures it had allegedly undertaken, it
was, once more, a fairly conspicuous failure to specify the
cost-reduction measures actually undertaken in good faith
before resorting to retrenchment. Upon the other hand, it
appears from the record that petitioner, after reducing its
work force, advised 110 casual workers to register with the
company personnel officer as extra workers. Petitioner, as
earlier noted, argued that it did not actually hire casual
workers but that it merely organize[d] a pool of Âextra
workersÊ from which workers could be drawn whenever
vacancies occurred by reason of regular workers going on
leave of absence. Both the Labor Arbiter and the NLRC did
not accord much credit to petitionerÊs explanation but
petitioner has not shown that the Labor Arbiter and the
NLRC were merely being arbitrary and capricious in their
evaluation. We note also that petitioner did not claim that
the retrenched and retired employees were brought into the
„pool of extra workers‰ rather than new casual workers.
Petitioner next contends that the NLRC committed
grave abuse of discretion in affirming the ruling of the
Labor Arbiter that the retirements effected by petitioner
were not valid since the basis therefor, i.e., Article XI,
Section 2 of the 1975-1977 CBA, had by then already
14
expired and was thus no longer enforceable or operative.
Article XI, Section 2 of the CBA provides:
„Section2.·Any employee may apply for retirement after having

rendered the equivalent of at least eighteen (18) years of service to
the COMPANY.The COMPANY,as a right, may retire any employee
who
_______________
14 This CBA lapsed on 31 December 1977. The retirements, on the other

hand, were made on 1 January 1980 and 1 February 1980.
191
VOL. 189, AUGUST 30, 1990 191

has rendered twenty(20) years of service, or has reached the age of

sixty (60)years. Employees who are physically incapacitated to
continue to work in the COMPANY upon certification of the
COMPANY Physician, shall be entitled to a separation pay
equivalent to the retirement benefits herein provided for that may
have accrued. The heirs or surviving legally married spouse of the
deceased employee shall be granted by the COMPANY the amount
equivalent to the accrued retirement benefit of the deceased
15
employee at the time of his death.‰ (Italics supplied)
Petitioner argues that the CBA was „extended‰ not merely

by implication, but by reciprocal acts·in the sense that
even after the CBA had expired, petitioner continued to
give, and the workers continued to receive, the benefits and
exercise the prerogatives provided therein. Under these
circumstances, petitioner urges, the employees are
estopped from denying the extended effectivity of the CBA.
The Solicitor General, as well as private respondents,
argue basically that petitionerÊs right to retire its
employees was coterminous with the life of the CBA.
On this point, we must find for petitioner. Although the
CBA expired on 31 December 1977, it continued to have
legal effects as between the parties until a new CBA had
been negotiated and entered into. This proposition finds
legal support in Article 253 of the Labor Code, which

provides:
„Article253·Duty to bargain collectively when there exists a

collective bargaining agreement.·When there is a collective
bargaining agreement, the duty to bargain collectively shall also
mean that neither party shall terminate nor modify such agreement
during its lifetime. However, either party can serve a written notice
to terminate or modify the agreement at least sixty (60) days prior
to its expiration date.It shall be the duty of both parties to keep the
status quo and to continue in full force and effect the terms and
conditions of the existing agreement during the 60-day period
and/or until a new agreement is reached by the parties.‰ (Italics
supplied)
Accordingly, in the instant case, despite the lapse of the

formal effectivity of the CBA by virtue of its own
provisions, the
_______________
15 Rollo, p. 143; Comment of the Solicitor General, p. 5.
192

law considered the same as continuing in force and effect

until a new CBA shall have been validly executed. Hence,
petitioner acted within legal bounds when it decided to
retire several employees in accordance with the CBA. That
the employees themselves similarly acted in accordance
with the CBA is plain from the record. Even after the
expiration of the CBA, petitionerÊs employees continued to
receive the benefits and enjoy the privileges granted
therein. They continued to avail of vacation and sick leaves
as computed in accordance with Articles VII and VIII of the
CBA. They also continued to avail of medical and dental
aid under Article IX, death aid and bereavement leave
under Articles X and XIV, insurance coverage under Article
XVI and housing allowance under Article XVIII. Seventeen
(17) employees even availed of Section XI (dealing with

retirement) when they voluntarily retired between 1
January 1978 and 31 December 1980 and received
retirement pay computed on the basis of Section 3 of the
same article. If the workers chose to avail of the CBA
despite its expiration, equity·if not the law·dictates that
the employer should likewise be able to invoke the CBA.
The fact that several workers signed quitclaims will not
by itself bar them from joining in the complaint. Quitclaims
executed by laborers are commonly frowned upon as
contrary to public policy and ineffective to bar claims for
the full measure of the workerÊs legal rights. In16 AFP
Mutual Benefit Association, Inc.v.AFP-MBAI-EU, the
Court held:
„In labor jurisprudence, it is well established that quitclaims and/

or complete releases executed by the employees do not estop them
from pursuing their claims arising from the unfair labor practice of
the employer. The basic reason for this is that such quitclaims
and/or complete releases are against public policy and, therefore,
null and void.
Theacceptanceofterminationpaydoesnotdivestalaborerof the right to
prosecute his employer for unfair labor practice acts. (Cariño vs.
ACCFA, L-19808, September 29, 1966, 18 SCRA 183; Philippine
Sugar Institute vs. CIR, L-13475, September 29, 1960, 109 Phil.
452; Mercury Drug Co. vs. CIR, L-23357, April 30, 1974, 56 SCRA
694, 704)
In the Cariño case, supra, the Supreme Court, speaking

thru
_______________
16 97 SCRA 715 (1980).
193
VOL. 189,AUGUST 30, 1990 193

Justice Sanchez, said:
ÂAcceptance of those benefits would not amount to estoppel. The
reason is plain. Employer and employee, obviously, do not stand on

the same footing. The employer drove the employee to the wall. The
latter must have to get hold of money. Because, out of job, he had to
face the harsh necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a case of adherence,
not of choice. One thing sure, however, is that petitioners did not
relent their claim. They pressed it. They are deemed not to have
waived any of their rights. Renuntiationon praesumitur.Ê‰ (Italics
supplied)
We conclude that because the attempted retrenchment on

the part of the petitioner was legally ineffective, all
retrenched employees should be reinstated and backwages
paid them corresponding to a period of three (3) years
without qualification or deduction, in accordance 17with the
three-year rule laid down in a long line of cases. In the
case of employees who had received payments for which
they had executed quitclaims, the amount of such
payments shall be deducted from the backwages due to
them. Where reinstatement is no longer possible because
the positions they had previously filled are no longer in
existence, petitioner shall pay backwages plus, in lieu of
reinstatement, separation pay in the amount of one-
monthÊs pay for every year of service including the three (3)
year-period of putative service for which backwages will be
paid. Upon the other hand, we find valid the retirement of
those employees who were retired by petitioner pursuant to
the applicable provisions of the CBA.
WHEREFORE, the Petition for Certiorari is partially
GRANTED due course and the Decision dated 2 July 1986
of the public respondent NLRC is hereby MODIFIED to the
extent that it had affirmed that portion of the Decision of
the Labor Arbiter dated 30 September 1983 ordering the
reinstate-
_______________
17 Insular Life Assurance Co., Ltd. v. National Labor Relations

Commission, 135 SCRA 697 (1985); Lepanto Consolidated Mining
Company v. Encarnacion, 136 SCRA 256 (1985); Panay Railways, Inc. v.
NLRC, 137 SCRA 480 (1985); Atlas Consolidated Mining and
Development Corp. v. National Labor Relations Commission, et al., 167
SCRA 758 (1988).
194

Baranda vs. Baguio
ment of employees who had been retired by petitioner

under the applicable provisions of the CBA. Except as so
modified, the Decision of the NLRC is hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Fernan (C.J.,Chairman),Gutierrez, Jr., Bidin and

Cortés, JJ., concur.
Petition granted. Decision modified.
Note.·An employee of a cooperative who is also a

member and co-owner thereof cannot invoke the right to
collective bargaining. (Batangas-I Electric Cooperative
Labor Union vs. Young, 167 SCRA 135.)
···o0o···
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Lopez Sugar Corporation vs. Federation of Free Workers

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SUPREME COURT REPORTS ANNOTATED VOLUME 189 16/11/2020, 5)22 PM

VOL. 189,AUGUST 30, 1990 179

LOPEZ SUGAR CORPORATION, petitioner, vs.

Labor Law; Circumstances under which the employer may

180 SUPREME COURT REPORTS ANNOTATED